QandAs: Loans

What is a PLUS Student Loan?

Answer:
The PLUS student loan is a program that allows parents and legal guardians to borrow money for their child’s education.

With other types of Federal student loans, the student applies for financial aid, and they become responsible for the debt. Since the majority of undergraduate and graduate students have little credit or no credit history, the bulk of student loans are non-credit based. Still, students receive a low interest rate and easy approval.

PLUS student loans work differently. Parents who apply for a PLUS student loan can borrow the total cost of their child’s education, and the money can be used for tuition, room and board, supplies, travel, and other related expenses. The interest rate on a PLUS loan is fixed at 8.5%, which is higher than most Federal student loans. In addition, to qualify for this loan, borrowers (parents) must have a satisfactory credit history. Late payments within 90 days of an application, bankruptcy, repossession, tax liens, and wage garnishments can disqualify a loan application. However, PLUS student loans are unique because they require no collateral. Thus, parents do not have to pledge their homes or personal property as security. What’s more, the interest paid on a PLUS student loan may be tax deductible.


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